Stephen Harper and some friends signed the so-called firewall letter in 2001 urging Alberta’s premier “to limit the extent to which an aggressive and hostile federal government can encroach upon legitimate provincial jurisdiction.” But there are ways and ways to do that.

If you can’t build a firewall, you can progressively sap any federal government’s ability to encroach upon provincial jurisdiction. You do that by getting money out of Ottawa — by the billion — or by binding it up to other ends — by the billion. It’s hardly a subtle business.

Over the next 20 years, these increases will expand National Defence’s annual budget from approximately $18 billion in 2008-09, to over $30 billion in 2027-28. In total, the Government plans to invest close to $490 billion in defence over this period.

(The 2008-09 recession led to some trims in the defence strategy’s spending projections — I’ll add details in an update — but the prognosis remains, robust spending growth for a long time into the future.)

And the foregone revenues from the GST cuts. I’m actually less interested in echoing the value judgment Stephen Gordon makes here than I am in reminding us all of the scale of the change in Ottawa’s fiscal position:

Unlike, say, corporate income taxes, the effect of the GST on the budget balance is fairly easy to calculate. …it blew a $12b hole in the federal balance that will have to be filled somehow.

What else? Jails. Actually not a huge incremental cost in the scheme of things, but worth throwing in:

When the Conservatives came to power in 2005-06, Canada’s federal corrections system cost nearly $1.6-billion per year, but the projected cost for 2011-12 has increased to $2.98-billion per year.

Jim Flaherty’s offer was this: Continuing the 6-per-cent annual increase in the Canada Health Transfer and 3-per-cent per annum hike in the Canada Social Transfer until the 2016-17 fiscal year; after that, until at least 2024, increases in the CHT will be tied to economic growth, while the CST will continue at 3 per cent.

The premiers are yelping because the 6% escalator they’ve enjoyed for a decade will end after 2017. Colleague Wherry is pretty sure this reduction in the growth of transfers breaks a campaign promise, or at least moves into the vacuum created by an absence of a promise. One or two longtime advocates of a strong central government are weirdly delighted by the optics of Jim Flaherty laying the spending plan on the table and daring the provinces to take it or leave it. As though this were some kind of macho theatre instead of arithmetic.

No, what’s happening is clear enough. “Health” transfers to the provinces will continue to gallop well ahead of economic growth for a couple of years, and then trot ahead of economic growth after that. Even though Ontario health spending, not atypically among the provinces, has already begun to flatten out. And incidentally, did you hear the finance minister say a syllable about health reforms driven by a federal mandate in return for this money? And can anyone find the health minister? Has she, in fact, given a single interview to a national news organization about health-care transfers since she got the gig? Rhetorical question.

So the provinces, which may find that their health-care spending curve doesn’t match the federal “health” transfer growth curve, needn’t worry because Harper and Flaherty won’t mind if they spend the money on frisbees. The provinces will get over their process-driven huff pretty soon; as a former Harper chief of staff points out, perfectly accurately, the provinces now enjoy far more certainty over their revenues from federal transfers than any federal cabinet minister enjoys about his departmental budget. At the height of the Atawapiskat crisis, the Aboriginal Affairs Minister had to appear before the Strategic Operating Review subcommittee of Cabinet to explain how he will, if asked, cut his departmental budget by 10%. It’s another planet from the one the provinces live on.

The money isn’t rushing out of Ottawa. Taken in isolation, there’s a kind of fiscal responsibility in the reduced-after-2017 rate of “health”-transfer growth. This isn’t a fire sale. Canada’s ninth-longest-serving prime minister, still seven years younger than Jean Chrétien was on the day Chrétien became prime minister, can afford to be patient.

But he will spend ever more money on jets and jails, while taxing less as a fraction of GDP than any federal government has since the 1960s, and sending a constantly-increasing share of money to the provinces, which can spend those dollars as they like. You can hear the air going out of the federal government’s — any federal government’s — ability to “encroach upon legitimate provincial jurisdiction.” From day to day this prime minister zig-zags in ways that would break a snake’s back. From 2001 to 2011 the line is as straight as a ruler.

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Harper’s flat-tire federalism

It would be curious to see how the Harper government would respond to a province that either 1) promoted extra-billing or queue-jumping or 2) stopped investigating / prosecuting extra-billing or queue-jumping.

Then the Canada Health Act will be enforced. The way we deliver healthcare needs to change if we are going to provide the services Canadians want and need in a timely fashion. However, the single payer is here to stay.

‘Whether Canada ends up as o­ne national government or two national governments or several national governments, or some other kind of arrangement is, quite frankly, secondary in my opinion… And whether Canada ends up with o­ne national government or two governments or ten governments, the Canadian people will require less government no matter what the constitutional status or arrangement of any future country may be.’

Oh give it a rest. The country will be just fine. He hasn’t outlawed elections the last time I looked. Quit being a drama queen. However, it won’t be a cradle to grave government. Over time the government will move out of areas which are provincial jurisdiction and it will be up to the provinces to actually manage their finances responsibly and not blame the feds for their failures in policies that they implemented or failed to implement.

And there will be 10 separate countries and territories, not one; and a permanet hodge podge of national services and standards from the 3 coasts. Good luck with maintaining the fantasy of that being one country we call Canada.

What’s with this illusion that premiers are inherently more democratic or less venal than PMs?

That’s the way the country was set up. The provinces have the powers which they need because they are closest to their people and supposedly understand their needs.

The feds role is very limited and the Liberals tried for years to exert their influence on the provinces by controlling the money supply to the provinces.
As you can see everything is working wonderfully in Canada. We have a superb healthcare system. We have a great education system and of course the best welfare programs in the world. Not!

Why? Because when things don’t go right the provinces lay the blame on the feds saying its the lack of money. Canadians never knew who to blame.

To think that Harper can get the premiers in a room and hash out national standards on healthcare is foolish. The premiers all have their own issues particularly when it comes to demographics etc.

So the government has given them five years to get their act togther. I would have changed the formula right after 014 when the current agreement ends.

However, it is a fantasy to believe that the national government is somehow the glue that binds the country together. Its like herding cats and a recipe for nothing being achieved.

If the premiers did their job and the PM did his job we would get along quite well. No scapegoating. Everybody accountable for their own areas of jurisdiction.

“To think that Harper can get the premiers in a room and hash out national standards on healthcare is foolish.”

Well, I think I have more faith in the PM and his abilities than you do. This is well within the grasp of any first minister, as long as the political will exists.

If we are collectively reminded that our current PM’s longevity has just surpassed that of John Diefenbaker, then we should also remember that man’s role in the ongoing conversation you call foolish.

Jameirp on December 20, 2011 at 7:20 pm

I have faith in the PM but I will make my point again. Each province has different healthcare needs. Some have younger populations and some older. With this in mind what works for one province may not work in another.

Yes the PM can make a big show of trying to have national standards etc but in the end it won’t work because it is in the interest of the premiers to keep have the feds as a scapegoat when they can’t or won’t fix the problems in his/her own healthcare system.

hollinm on December 23, 2011 at 8:07 am

Sounds nice, but surely you might have noticed that the current crop seems to have a problem embracing accountability.

mtl_bcer on December 20, 2011 at 8:23 pm

“That’s the way the country was set up. The provinces have the powers which they need because they are closest to their people and supposedly understand their needs….The feds role is very limited…”

????

You really have no clue how the constitution works, do you. The provinces were given some specific powers, as was the Dominion (federal) government. What was not specifically enumerated as federal or provincial falls to the Parliament of Canada under the “POGG clause” (peace, order and good government.

This includes health care. The provinces were given only the “establishment, maintenance and management of hospitals and asylums” (section 92.7 of the Constitution Act). That’s why parliament was able to pass the Canada Health Act in 1965, which continues today, as amended over the years.

Dominion Lad on December 23, 2011 at 1:47 am

Unlike you I gather I am not a constitutional expert.

However, the fact is provinces are responsible for delivering healthcare. If as you say section 92.7 is applicable then my point is made.
Yes it would be nice if the feds and the provinces could agree on national standards but the issues are different in each province and so it is unlikely they will agree on a cookie cutter approach.

hollinm on December 23, 2011 at 8:02 am

If you truly believe what you are writing you will want to re-think your hatred of Alberta. If we are all separate, it might be wise to go with a “have” v. “a have not”….even if you must live with some of us “dirty oil-loving Texas-tea party GOP rightwing Albertan Rednecks stuck in the 1950’s”.. Social programs, like healthcare are very expensive and our detestable province might be the only one that can pay for them. Also, we have living people here from all over so you hardly EVER meet a born and bred Tarsand-loving, environment hating Albertan. Something to think about when this “apolocalypse” happens.

For your information i’ve lived in AB for at least a dozen years – maybe closer to 15. I loved the place and people – it’s politics particularly vis vis the federal govt you can have;although it’s certainly not as obnoxious as Quebecs poor forever injured patter.All provinces play the game to some degree or other.
So i”ll thank you to keep your partisan poor little alberta rants to yourself – i need no lessons from little canada promoters.

kcm2 on December 22, 2011 at 7:32 pm

Well the true crazies wanted to starve the beast by building aircraft carriers. So this is not as bad as the depths that delusional right wingers at one time pictured.

“In total, the Government plans to invest close to $490 billion in defence over this period.”
If health spending is tied to economic growth, shouldn’t defense spending be tied to GDP as well? Which one will the majority of Canadians think is more important?

Plenty of dead Libyans anyway, ol’ Bean. Some of them killed by our bombs that of course *never* hit any civilians. Some of them killed by the tribesfolk we backed against the other tribesfolk. Would you have the guts to say we saved them, to their graves?
As to Kosovo, don’t make me laugh. Kosovo was relatively liveable before we turned it into a cesspit. Ethnically Albanian Kosovars were governed by a mildly authoritarian but functional government; now we’ve handed it over to gangsters who have turned it into one of the world’s prime spots for human trafficking. Even the ethnically Albanian Kosovars are worse off–and of course the ethnic Serbs have been ethnically cleansed, the precise injustice we were supposedly stopping except it happened to the civilians we designated as undeserving, so I guess it’s OK.

purplelibraryguy on December 21, 2011 at 3:21 am

Yeah, we would have been better off letting them all get slaughtered by Gaddafi and Milosevic.

You’re awesome.

OrsonBean on December 21, 2011 at 1:15 pm

There have been big cuts at Environment Canada.
Will future governments be justified in saying “it was cut severely by previous conservative regimes. We (insert party here) are just getting it back to where it should be?”Admit it. It all comes down to ideology. Some prefer military spending. Some prefer environmental spending. With declining revenues it will surely become “either/or” in the decision making.

Or at least they say they do.. but what they mean is less spending on things they don’t personally take advantage of.

Thwim on December 20, 2011 at 12:43 pm

Fair enough.
.But which party is that?

Plaid Dinner Jacket on December 20, 2011 at 1:08 pm

Didn’t mean for my comment to imply Harper’s done a very good job of it, although he’s got four more years to turn it around.

GreatWallsofFire on December 20, 2011 at 1:34 pm

Good luck with that. Harper’s delusional. The spending will simply occcur in a more direct manner in the provinces instead of via Ottawa – Premiers will be only too happy to step into the resulting power vacuum.

kcm2 on December 20, 2011 at 1:23 pm

The Federal Govt should only look after only truly national issues. It would be good thing if Harper was decreasing Federal spending but he’s actually increased the Federal budget every year he’s been PM.
We can only hope there is a ‘power vacuum’ and the Provinces’ standing (vs the federal govt) does increase.

BCanuck on December 21, 2011 at 12:56 am

There is an area where it would help to decide who is in charge. Any major project requires years of study and many permits from the province and then more year going over the same ground and getting more permits from the feds.

A single, enforceable, comprehensive review process would get more done and cost less in delays.

By 2015-16, health will have seen 6% year over year increases for a dozen years. Which is basically a doubling (though inflation would bring it to somewhat less than doubling). Certainly an escalator based on nominal GDP is reasonable after such a high baseline of funding is established?

Good article. It shows how very well Harper has been transforming Canada while convincing media and the electorate that he’s really just a moderate. While claiming this moderation, he has slowly and in plain sight torn down many of the legislative, regulatory and institutional foundations of what used to hold Canada together.

I’m sure everyone in the Texas-based oil industry who now control Canada via Alberta and via Harper are most gratified at this outcome. As for us lazy and indifferent Canadians, we have no-one to blame but ourselves for losing our country to the right-wing of the GOP.

Wow….you think that people who vote conservative don’t want universal healthcare? No wonder Harper won a majority government. You people are so busy demonizing conservatives, you don’t even know what they think or believe in. While it is true that Ralph Klein floated the idea of a “third way” allowing for private healthcare in Alberta, he was completely shut down but the populace. The only private clinics that I am aware of that provide health services that are paid by the government are eye clinics that do lazer eye surgery. Pretty much every other type of clinic that is providing care is government run under the healthcare region. Now if you are looking at innovation, you could look East to Ontario. I understand they have quite a few private clinics that provide healthcare services paid by the government. Maybe you should set your paranoid sights on that province.

I am amazed at how most Ottawa pundits totally miss the Harper agenda. Thank goodness for Paul!
In their yearenders most pundits are expressing shock that Harper is continuing the hard ball election tactics of the minority period, and is continuing the policy of diminishing the importance of parliament and its committees in Canadian political life.
I wish Paul would look at the end game involved in these two parallel strategies: parliament irrelevant between elections and the elections themselves manipulated by sophisticated media techniques and outright cheating.

Which institutions would those be? Last time I looked, all our institutions were still intact. If you think the CWB and the long gun registry are institutions, you have a strange definition of the word.

The House of Commons and its Committees. Both are effectively irrelevant remotely operated pieces of equipment whose only purpose is to unthinkingly execute the will of the PMO, preferably with minimum transparency and accountability. If you think that is how these institutions were designed to operate, I am saddened.

Alberta is the highest per-capita spending province in the country and that is true for its health care budget as well. Universal publicly funded health care is just as cherished in Alberta as it is in the rest of the country.

If you checked your facts, “Me” you would know that Ontario has far more clinics which are privately owned and provide healthcare to citizens at the behest of their provincial government than Alberta has. If any province has “challenged” the Canada Health Act, it is Ontario. Here in “Texas-controlled” Alberta we even give our citizens free healthcare premiums so we are probably the only province who can honestly say that our healthcare is free.

Alberta’s health care is paid for by thick, gooey stuff pumped out of the ground. And I know this is a sore point for Albertans when I bring it up. Digging up oil is hard. Alberta is the only province with the moral fibre to have billions of barrels of oil sitting in its backyard.

Wait a minute…are you suggesting that the provincial governments and healthcare administrators in this country are doing “their best” with regard to runniing the healthcare system in this country and that with all the dollars that are currently being spent, we cannot expect any improvement?
Alberta spends more money per capita than any other Province on healthcare and yet our wait times in the emergency departments and for surgeries are deplorable. Do you know what our provincial government and healthcare administrators spent healthcare dollars on? Paying physicians off so they would sign non-disclosure deals and leave the province when they were “fired” or lost hospital privileges because they complained and advocated for their patients. You don’t have to take my word for it. The Health Quality Control Council of the Province is investigating and we are expecting them to call a public enquiry in February.
You must be very naive if you think that there is no corruption, laziness or power struggles on a provincial level that undermine the prompt and safe delivery of healthcare in Canada. If you are from Ontario you should be aware of the whole “healthcare records debacle”. There is so much wastage and no one is held accountable and worse than that, hardworking bedside physicians and nurses are bullied by administrators. Some one has to call a halt to the way business is done. The money is there but there is no accountability regarding how it is spent.

Paul you write all of this as if it is a bad thing. Most conservatives be they from eastern or western Canada want the federal government to be smaller than it is now – for it to have less in the way of discretionary income. The CPC has moved steadily in that direction despite having a minority for several years. Canadians largely agree and have given the CPC a stronger mandate to do more.

That said – notice that areas where the federal government has clear juristiction – defense, crime – it has implemented sustainable funding. As for the precolumbian file – look for the CPC to try and liberate those groups from the Indian acts ghettoization – more spending won’t prOvide that.

It may or may not be a good thing. It would have been nice to have had a discussion over it.

No, an election is not a discussion. It is a disingenuous argument to pretend that it is. And Canadians do not largely agree. More Canadians did not vote for the CPC than did. Harpers successful manipulations and tactics do not prove that a plurality under a First-Past-the-Post system proves a consensus on behalf of citizens.

“The CPC has moved steadily in that direction despite having a minority for several years.”

Um, hunh??? The government has increased in size under Harper every single year. There were more people employed by the federal government in 2008, before the recession even hit, than every in our history, including every single Liberal government. Not to mention the record breaking spending in the 2007 budget which was broken by the 2008 budget which put us into a deficit even before the recession that Harper guaranteed would not come.

“Canadians largely agree”.

That’s just simply not true. Through our democratic system, they have a majority. But to state, as a fact, that “Canadians largely agree” when only 24% of eligible voters voted for the Conservatives points to the very opposite.

“implemented sustainable funding”

How so? It is refusing to provide even a penny more for the multiple billions of dollars it has downloaded onto the provinces with its dumb on crime legislation. It has in fact increased spending, hugely, for sure, in these areas, ever more increases coming, but it has cut back on taxes so how has it made anything “sustainable”?

Govt spending of the discretionary sort hasn’t changed that much – as Paul sells points out. Transfers to the provinces have and taxation capacity has been reduced – thus the fiscal freedom of the federal govt and thus its role in the lives of Canadians has been reduced.

And this has all been done slowly but surely as per the CPCs policy platform that has been there for all to see for a decade.

40 percent of voters choose the CPC. Under our system that gave the CPC a majority mandate – much as similar or less support gave the lpc ten years of majority. They have a legimiate meander as did the lpc. And saying “only 24%..” assumes that every no voting Canadian was not a conservative and that simply isn’t the case.

..” assumes that every no voting Canadian was not a conservative and that simply isn’t the case.”

That’s a logical fallacy if you really think it through. You’re claiming the complete, implicit, support of the 40% and at the same time claiming the right to disqualify implcitly the portion of the 60% conservative voters who did not vote conservative for whatever reason.
The fact is the reason is irrelevant, the cons who didn’t vote or who may have voted for the opposition parties have registered their verdict on this particular conservative govt – you can’t have it all ways.

Which is precisely what keeps me voting Conservative, despite warts too numerous to mention. They’ve been sloppy, at times reckless, but I see a steady erosion of the ability for any future federal government to resume any sort of expansionist role. As Wells says, Harper always plays the long game. Neutering the federal government and limiting its opportunities for future activism, even if NOTHING else is accomplished, is well worth the effort. There remains much work to do in that regard. And I’m guessing we’ll see it over the next 3.5 years.

If people do not exercise their franchise to vote then they have chosen to accept the results of the election by not voting. To make any claim as to how they might have voted is quite simply irrelevant.

As for sustainable – the provinces have their funding role for crime and the Feds have theirs. That spendthrift provinces like Ontario don’t like to pay for what they spend is their problem – not the Feds.

Most Canadians are not “political animals” as your are, Gord. Months of ad hominen attack ads during their US prime time shows preceeding the last general election did it for most Canadians (those that deigned to vote, that is).

Harper, the ever tactician, is effecting his “play book”. The ground is being laid, ever so slowly and stealthily, and like frogs in a pot of cold water slowly being brought to the boil, will realize too late what’s happening to the fabric of this federation.

Sadly, most Canadians simply are woefully ignorant of the true plans and direction of this regime.

My chief concern is the almost total lack of any debate on these issues in parliament and its committees. Harper has effectively muzzled Canada’s national House of Democracy.

How is this different from what Chretin/Martin did? Aside from the fact they were better at it. They really cut spending, and the tax cut of 2000 was much bigger, both at the time and going forward than the GST cuts. Also Harper didn’t make any increase to defence spending that Martin hadn’t already budgeted for.

Harper boosters may not like to admit it, but Harper really is following Keynes advice. Cutting taxes and increasing spending during an economic downturn. I mean, sure, ideally I’d prefer it if he spent the money on transportation infrastructure and citizen education as opposed to oppression infrastructure and criminal education, as that way we’d get multiplier effects from the spending later on, but still. It’s a step in the right direction — so I’ll give him kudos for that on the macro level.

The corruption worries me, however. It’s possible to lessen the federal government’s influence and abilities without tainting it, and by doing that you make it a lot harder for the government to increase taxes and reduce spending later on — as people come to look at it as a pork-barrel regime so don’t want to give any more to it, while at the same time not wanting to give up any of the pork they personally get.

It’s unfortunate that Harper doesn’t have the cojones to be upright about any of this. He always has to leave it unsaid, hide it behind the bluster, sneak it in through technicalities, and can’t just be brave enough to come out and declare the intent during the elections to dismantle the federal government.

Why not? Trudeau was brave enough to announce that the government shouldn’t be in the bedrooms of the nation, why can’t Harper even live up to Trudeau?

Give me a break. Yes the government spent money in Clement’s riding. Yes we may not like what they spent the money on. However, it was not hidden and Clement did not put a dime in his pocket. The money was accounted for and the projects completed. Your idea of corruption should be adscam. None of us will forget that.
Are you suggesting that no government has spent money on projects we didn’t like before.

Well there is that Peace Bridge in Calgary…25 million dollars for a pedestrian bridge that hasn’t opened to foot traffic.

Healthcare Insider on December 20, 2011 at 3:16 pm

Not federal, so doesn’t apply.

Although I’ll agree that’s as frustrating a piece of pork-corruption as there ever was.. especially when you see it’s less than two blocks away from another bridge over the same river that already has a covered pedestrian walk-way.

Thwim on December 20, 2011 at 3:56 pm

How can you possibly claim a municipal bridge put up by the City of Calgary is the responsibility of Stephen Harper and the federal government. Nice looking bridge by the way.

Tom on December 21, 2011 at 9:57 am

Thwim, Tom….I was just giving you another example of a “government spending money on projects we don’t like”. It doesn’t have to be federal to apply. That is the point….just because a politician makes a wasteful and stupid decision, doesn’t mean he/she is “corrupt”. It just means they are wasteful and stupid. As to the bridge in question, we have some other nice looking bridges that cost a fraction of the price of this so-called “tourist attraction”.

Healthcare Insider on December 21, 2011 at 2:26 pm

So in adscam, which cabinet minister lined his pockets?

And you are fooling yourself if you think Mr Bean, sorry, Tony Clement (I always get those two mixed up) did not hide anything, all the damning information came from ATI requests to other levels of government. He tried to hide everything he could, to the point of hiding himself behind John Baird.

I’m sure its completely impossible that any of those contracts using funds for border security went to any of Tony’s cronies.

You brought up bedrooms. Having been dragged through the “marriage” and related wars, which were a direct result of Trudeau’s Charter, it just grates every time someone credits Trudeau for getting the state out of our bedrooms.

A very cogent point of view. So Harper really has not changed his position since the firewall letter. He is simply saying to the provinces without saying the words maybe you have your responsibilities I have mine. I am going to give you the money and it is up to you to set your priorities and spend the money as you see fit. However, for the bandits managing the Ontario economy they have no idea what they are doing so any kind of reduction in the largesse flowing from Ottawa causes them to set themselves on fire. They are lucky he didn’t change the formula effective 014, Then they would have something to complain about.

145 years ago people didn’t have electric lighting in their homes. Odds are they had no frickin’ clue what our society would be like or need. And personally, while you might be comfortable sitting in an outhouse with a candle, I tend to like that things have advanced.

While you may have difficulty with this, most of us have learned how to flush a toilet. Is it really so much to ask that our government show a bit of evolution as well?

Thwim on December 20, 2011 at 1:51 pm

You appear to have difficulty comprehending. I’ll dumb it down for you. What technological advance of the last 150 years demands we open the Canadian constitution and rearrange the allocation of powers?

GreatWallsofFire on December 20, 2011 at 3:29 pm

You appear to have difficulty comprehending, I’ll dumb it down for you. What makes how powers were allocated almost 150 years ago in any way applicable to today? No other aspect of society has remained the same no matter how much difficulty you have coping with it, why should this one?

Thwim on December 20, 2011 at 3:49 pm

OK, I’ll bite – what provincial powers should now become federal ones and vice versa because “no other aspect of society has remained the same”?

GreatWallsofFire on December 20, 2011 at 3:53 pm

And the foregone revenues from the GST cuts. I’m actually less interested in echoing the value judgment Stephen Gordon makes here than I am in reminding us all of the scale of the change in Ottawa’s fiscal position

Yeah, he made that argument quite some time ago. But let’s not forget, recently BofC’s Mark Carney warned about record household debt in Canada. I’m pretty sure I questioned Gordon about that at the time (his blog – my comments seem to be mysteriously disappearing) – how he can be so certain that the $12 billion didn’t quickly get recirculated into the economy in the form of more consumer spending. And hence the net loss to the gov’t coffers is much less?

I never got an adequate response. But, I stand by my point.

Though PW’s overall point I agree with – why Harper is pushing so hard for unfettered oil sands expansion – he needs the taxes and revenue from this industry to “project” his values outside of Canada (military etc)

Sorry to revisit this, but I still don’t follow your GST-cut non dynamic effect as explained in your comments in the previous post.If low interest rates fuel consumption/excessive debt, why wouldn’t a GST cut have the same effect?The plot of debt-to-income ratio of Canadian households on a recent Krugman blog suggests no real change in the slope of the line over the GST cuts period. http://krugman.blogs.nytimes.com/2011/03/04/oy-canada-2/
Posted by: Georgian | March 05, 2011 at 11:30 AM
**********************
Have you taken a look at this old post?Posted by: Stephen Gordon | March 05, 2011 at 11:41 AM
***********************
Yes, thanks. I was looking for dynamic proof. If increasing household debt to the levels that Krugman, Carney and Flaherty are concerned about, it strikes me that most consumers in Canada don’t necessarily act rationally. Was looking for recent empirical proof otherwise.
Posted by: Georgian | March 05, 2011 at 12:15 PM

The reason would be due to the efficiency of VATs like the GST. If the deadweight losses are small (which they are in empirical analyses of the effects of various forms of taxation), then changes in the tax will have relatively small second order effects. In other words, it just isn’t plausible that a reduction in GST sparked a wave of consumption that significantly reduced the on-going cost of the cut to the treasury.

Because PIT and CIT are less efficient and have large deadweight losses relative to VAT. I’m not making any argument that these tax cuts resulted in large multipliers, either. CIT cuts will have long term positive impacts, but we have not begun to see these yet.

Weren’t you dismissive of people trying to tie Harper’s past comments with this present version?

Any half-wit can deconstruct and appeal to the lowest common denominator (something Harper excels at). He has absolutely zero ability to govern, which requires real intelligence and creativity and more importantly, effort. The easiest way to “decentralize” is to make the federal government impotent and farcical, and to create a self-fulfilling level cynicism in the voting public. This he has consistently been doing this since he has been able to hold power.

And Harper succeeds because the checks and balances were not made to deal with people bent on destroying the very thing they were elected to uphold. There is basic assumption that people who seek office do so to create a better country, not to build a CV for consulting post-office.

It is really really disturbing that people sit back and fail to realize that the game is afoot and has been for almost a decade.

“But he will spend ever more money on jets and jails”
Grownups understand that Canada has NATO commitments and that crime should have meaningful consequences. If this means a marginal increase in Canada’s incarceration rate – currently the 128th highest in the world – and associated costs, then that’s the cost of justice. The jets and jails meme seems cheap demagoguery which reflects worse on its pushers than Harper and the CPC.

“while taxing less as a fraction of GDP than any federal government has since the 1960s”

That’s strange, the front page of macleans.ca links to this article with the headline that Harper is “taxing less than any federal government has since the 1960s”. See what you did Paul? The true measure is taxation per capita in real dollars – linking it to GDP creates the illusion that taxation is falling while in fact it is increasing. Real people are paying real increases in real taxes in real dollars and have been since 1960, irrespective of what is happening to GDP.

In 1960, the federal government taxed about $2700 per person in constant 2006 dollars. In 2011, the feds tax over $6,000 per person in constant 2006 dollars. So if by “less” Maclean’s means “over twice as much”, then I suppose the claim is factual.

I am advised by today’s Warren Kinsella column that Jason Kenney is a hater and therefore have reason to suspect that link may contravene s.13 of the Canada Human Rights Act, so I can’t click it. Got anything else?

“while taxing less as a fraction of GDP than any federal government has since the 1960s”
Someone with better economic credentials can correct me, but hasn’t the individual median income increased somewhat since 1960? You don’t have a point as far as i can see.

They need to take it one step further: stop providing any money at all for provincial responsibilities. The provinces should tax for — and be accountable for — 100% of their spending. We can hear from this week’s bleating how dependent they are on the federal government’s skirts to hide behind.

“The unmanageable character of long term credit in terms of allocation of yields in relation to costs became evident in the enormous reduction in value of railway securities in the United States, in the emergence of large fortunes through reorganizations and the formation of trusts, and in the evolution of the Canadian federal structure as an instrument capable of carrying an expanding debt. The problem of debt is the problem of Canadian federalism as the federal structure is a credit instru-ment.” Harold Innis, 1938. “The Penetrative Power of the Price System”

This is the crux of the issue. The federal government is the sovereign government with money power. It is the only governing body capable of managing the deflationary pressures that inevitable comes at the end of expanding debt obligations. Hence the rationale for initiating the Bank of Canada in the midst of the Great Depression, the old institutional arrangement between the state and the Bank of Montreal proved insufficient to deal with the collapse of the credit economy. Hence the pressing need right now for interest-free loans from the CB to municipalities and provinces so they can maintain and improve public capital in transit, healthcare, infrastructure.

I’m somewhat at a loss as to the conclusions of this article. Perhaps it’s just an update, and does not intend for grand conclusions.
So, it seems as though you’re saying the govt is:
-increasing spending in some areas of federal jurisdiction
-at the same time, cutting dramatically in other areas of federal jurisdiction
-increasing spending in areas of provincial jurisdiction, but not attaching any strings, and will eventually be tying that spending to GDP growth
-taking in less taxes

It seems to me that this suggests an eventual transfer in income tax points. Since there are no strings to the increased provincial transfers, and they are increasing, and Harper doesn’t care if the money is spent on frisbees, I guess it may be just as good if the provinces collect the money themselves.

If the Federal Govt is shrinking why has it’s budget grown faster than inflation and population growth every year Harper has been PM? There are more people working for the Federal Govt than when Paul Martin was PM. Harper is so crafty he’s shrinking the Federal budget so slowly it’s actually increasing. If he was a real conservative (or Reformer) he would have held the Federal budget at the same dollar amount as the last Liberal PM regardless of inflation or population growth.

The Federal Govt’s influence SHOULD be decreasing. The Provinces should have more say in how they manage public affairs in each Province and the Federal Govt should butt out.

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